Titan Watches Analysis According to Pestel Model

This sample essay on Pestel Model provides important aspects of the issue and arguments for and against as well as the needed facts. Read on this essay’s introduction, body paragraphs, and conclusion.

Titan Watches PESTEL Analysis :

Pestel stands for Political, Economical, Sociocultural, Technological Environmental, Legal analysis of the external environment affecting the business. PESTEL analysis is done by managers to understand the macro environmental factors affecting the business. These analysis are strategic tools for understanding market growth, market share, latest trends etc.

Political factors :

These refer to the relevant government policies that affect the business environment.

For eg. Tax policy,labour law , minimum wages law ,tariff rates etc

Economic factors:

These refer to the macro economic factors that may affect the business. For eg. Inflation, Gross National Income, Gross domestic product, REPO rate, reverse Repo rate.

Socio-cultural factors:

Titan Watches Market Share

These refer to the various social and cultural factors prevalent in the business environment. For eg. Greater awarness of the people towards environment, changes in taste of the consumers, average age of the consumers etc.

Technological factors: These include the technological factors such as R&D activity, automation and other innovations which has changed the way business is conducted.

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For eg MP3 players, IPOD, Iphone, Tele conferencing, cloud computing to name a few.

Environmental factors:

These include the environmental and ecological factors that affect the business for eg climate change, global warming, and rapid depletion of our natural resources. * Legal factors: These refer to the legal environment in which the business is conducted. For eg. Trade barriers, consumer law, anti-dumping duty, corporate acts.

Titan group Titan was formed in 1984 with the joint venture of Tata group and the Tamil Nadu international development corporation. It is mainly present in the watch industry although it has successfully forayed into the jewellery segment with the launch of Tanishq. Some of the notable brands of Titan are Sonata and Fastrack . It has made successful JV with international brands like Tommy Hilfiger,Hugo Boss,fcuk and made their presence felt in India. It has also made foray into eyewear with the launch of Fastrack eyewear and sunglasses. Alongside Tanishq, Titan has Zoya, the largest retail chain in luxury segment.

It has a total of 665 retail outlets all over India backed by a committed workforce of around 5000 employees. PESTEL analysis of Titan

Political factors :

The Watch industry in India was started by the Indian government with the launch of HMT(Hindustan machine tools) in 1961. Till 1991 HMT enjoyed market leadership due to the trade barriers in the form of quantitative restrictions imposed on foreign products. There were very few players giving serious competition to HMT. But the scenario drastically changed with the formation of Titan and the liberalization policy adopted by the Indian government in 1991.

As the trade barriers reduced, more and more players entered the Indian Watch industry which has one of the least watch penetration ratio all over the world (27%). Although the Indian government has successfully reduced the taxes and duties on imported watches and components it is still 50 to 60 percent over and above the watch prices in Singapore or Dubai. Due to this smuggling and tax evasion is quite prevalent in India.

Economic factors:

The Indian Economy is on a boom. It is having an impressive growth of 8-9 % per year which is second only to china.

There is a huge influx of foreign investment in India in all the sectors including watch industry. Many International brands are have set up their retail outlets in india. The Indian watch Industry is growing at an impressive growth of 20% for the last two to three years. The luxury and the premium watch segment is the fastest growing segment with 25% growth per annum. The percapita income of the middle class Indian has increased many folds from a meager 500$ in 1990 to 1500$ in 2010. There is a moderate rate of inflation @ 10% per annum which is far below than many developed countries.

Indian consumers are more confident than a decade ago and they are buying products which were a dream for their previous generations. More over with the advent of globalization and internet there is no dearth of information about the commodities. Socio-cultural factors : The Indian consumer is highly segmented with respect to the Indian watch industry. The various segments can be segregated as below * The Indian Urban fashion consious elite: This segment of people buy watches as a fashion statement and for them Titan has exclusively launched the ZOYA brand.

The watches of this segment range from Rs 1500 and above. This segment is not Price sensitive. Most of them are brand conscious and very few of them frequently change brand. These people have a yearly salary of more than 8 lakhs. * The Indian Urban upper middle class : This segment of people are somewhat price conscious. They want to buy the most stylish watches at the most affordable prices. Titan has launched the Sonata segment specifically to cater this segment. These people are the bridge way between Indian deep rooted values and western fashion statement.

This is the reason Sonata has launched Bandhan for married couples. It is a set of two watches for both the husband/boyfriend and wife/girlfriend. This category of consumers wants to get the best thing at the best affordable price. They don’t mind to pay the extra buck if the quality is good. This segment of consumers has an annual salary of 4-7 lakhs per annum.

The Indian urban youth:

This segment of consumers are fashion conscious. The age group of these consumers is between 15-28 yrs. The sports watch is specifically meant to cater this segment of consumers.

Titan launched the Fastrack segment of watches for this segment. This segment wants to buy watches of the latest trends to show a style statement to their peers. This segment is relatively less price sensitive than the Indian Urban middle class. Apart from watches, Titan has also forayed into the eyewear segment with the launch of Fastrack eyewear to cater to the needs fashion needs of the Indian Urban youth.

The Indian Urban middle class/Rural middle class:

This is the segment where maximum volume of sales takes place. This is the most price sensitive consumer segment. The watches are below Rs 300 range.

This segment is catered majorly by the unorganized sector. An unique feature of this segment is that consumers go for metallic watches even though they are heavier and costlier than the plastic ones. Metallic watches gives a sense of sturdiness to the watch which is absent in plastic watches. This is segment is the most price sensitive segment as the disposable income is very less. The consumers of this segment give high importance to warranty. They use watches not for style statement but for tracking time. They treat watches as a lifetime asset and brand plays a very important role in their buying decision.

It is very common to find HMT watches that has been bought by the father to be passed on to the next generation. With the mobile phone rapidly becoming an integral part of the consumer’s daily lifestyle, it provides a serious threat to the Indian watch industry. Earlier watches were bought mainly for two reasons to keep a track of time and for alarm. All these features being now widely available in Mobile phones at throw away prices, they are giving a serious competition to the Indian watch industry specifically the segments which are price sensitive.

Technological Factors:

The Indian watch industry was kick-started by the launch of HMT. HMT produced mainly mechanical watches which dominated the Indian market till Titan was formed in 1984. Titan introduced Quartz watches which were an instant hit in the market. The Quartz watches were based on the Quartz crystal technology which did not need mechanical components for its functioning. After Quartz technology came the digital technology. Digital watches were popular because of their precision and design flexibility . It also drastically reduced the price of the watches making it affordable to the common man.

Digital watches are very popular in the unorganized sector which accounts for around 60 % of the total watch market. The luxury bands like Rolex have their own technology which is reflected in their products. Although Titan is moving towards Rural, Semi urban markets but still its majority sales takes place in the urban markets. The majority of its customers are contemporary, trendy internet savvy urban youth. With the advent of online sites like e bay and Amazon. com Titan should also go online with its entire product portfolio.

It will also indirectly enhance its international presence resulting in increase in the bottom line.

Environmental Factors:

The Watch industry is one such industry which has one of the highest scrap age rates. Most of the watches having plastic as one of their major components are not biodegradable causing serious threat to the environment. Majority of the watch components are outsourced from third world countries like Taiwan where the working conditions are very bad. Also most of the electronic components that go into the watch like LED and electronic circuits are not biodegradable.

The gases that are formed after burning of these components are major constituents of global warming.

Legal Factors:

Although the Indian Government has drastically reduced the Import duty and tariff rates still the duty is 50-60 % higher than the actual price. This leads to a lot of smuggling causing a huge dent in the exchequer of the Indian government. This is quite prevalent in the watches present in the luxury segment costing more than Rs 50000. These watches are bought to India by illegal means in completely knocked down(CKD) form and then sold at a considerable discount.

Although with the advent of modern retail this has reduced to a slight extent but it is still prevalent widespread.

Conclusion:

Taking into consideration all these external factors we can safely conclude that Titan is better positioned than ever before to exploit the Indian watch industry. With a very low watch penetration percentage it is expected that the Indian watch industry will grow in double digits in the near future. Although many foreign players have entered the Indian market but they have failed to catch the imagination of the Indian consumers as a whole.

It is evident from the fact that Titan has more than 65% market share in the organized watch sector. Indian market is a complex market and Titan is going in the right direction by launching products which reflects the cultural ethos of Indian consumers like Bandhan and Fastrack two entirely different market segments. Titan established itself as the market leader by launching the latest technology from time to time. It outlasted HMT by launching Quartz watches and has kept up with the latest technology by launching digital technology as when was required. It is one single brand that caters to all the consumer segments.

It has its products in the luxury segment like Zoya as well as products for the common man below the price range of Rs. 300. With the urban youth(which constitute more than 60% of the population) moving towards a western kind of lifestyle Titan has taken the right step by foraying into jewelry and eyewear. But Mobile Phones fast catching up as a substitute for watches Titan should diversify its business into high-end designer mobiles with a specific focus on watches(like mobile phones designed like a watch) to offer better diversity to the Indian consumers.